Outlook: Oil prices slipped to a 13-week low yesterday in what was an overall uneventful day of trade. Prices are bouncing slightly with the holiday session extending through today. Crude is the firmest of the bunch up nearly 1% while refined products shuffled around near even. The drone strike that struck the CPC pipeline appears significant as the dust settles with as much as 380,000 bpd of crude flows from Kazakhstan through Russia being disrupted. Russia began discussions with the US in Saudi Arabia while the G7 mulls tightening the oil price cap in an attempt to persuade meaningful negotiations. The peace plan reportedly includes holding new elections in Ukraine before signing a final agreement. We’ll see if the market finds firmer footing as traders return to the desk today. Weekly fundamental reports and estimates are all delayed by a day this week due to the Monday market holiday.
Crude
- The Ukrainian drone strike on the CPC pipeline through Russia could reduce transit volumes by 30% (~380,000 bpd) from Kazakhstan and take up to two months to fix. (Reuters)
- US and Russian officials met in Saudi Arabia today to discuss ending the war in Ukraine.
- The G7 is considering a tightening of the Russian oil price cap. (BBG)
- OPEC+ is considering delaying its 120,000 bpd/month production increase scheduled for April, according to one delegate. Russia’s Deputy Prime Minister denied the claim. (BBG)
- Privately run crude terminals in China continue to take deliveries from US-sanctioned oil tankers with 700,000 barrels being unloaded last week. (BBG)
- China’s Shanghai oil futures have risen sharply above Brent and Dubai benchmarks due to a shortage of heavier and sour crude grades.
- The prompt WTI spread has flipped to contango with the nearby contract discounted to the second month contract.
- As of 8:36 am CST: Brent crude oil up $0.29 to $75.50, US dollar index up $0.411 to 106.986 while the nearby e-mini S&P 500 futures contract up 8.25 to 6140.00.
Diesel
- European diesel futures have seen a steady increase in backwardation due to both planned and unplanned refinery outages impacting supply. (BBG)
- US Diesel futures remain backwardated through the August contract with August trading near a 16 cent discount. Cargoes diverting the to the US is contributing to the tightness in Europe. (BBG)
- Group 3 basis -0.75 to -17.00c.
- Chicago diesel basis -7.5 to -27.50c.
Gasoline
- Russia plans to discuss a full gasoline export ban on February 20th this week.
- Managed money increased bullish Nymex gasoline bets by 1,909 lots to 48,683, highest in 3-weeks.
- March-April spread trading around -22.50 today.
Propane
- Prompt Conway futures are indicated at .9150 while Belvieu is trading at .9175.
- Conway Swap Oct25-Mar26 strip indicative midpoint ~.8250.
- Conway propane is trading at 54% to WTI.
- US propane weighted HDDs for February are 40 higher than the 30-year average and 209 higher than last year.
- March HDDs are forecasted to be nearly a 100 higher than last year but 23 below the 30-year average.
Natural Gas
- Overnight weather runs removed 11 HDDs through the two-week forecast.
- European weather is projected warmer over the next two weeks which could provide further relief to TTF prices, which are down over 1% this morning.
- Baker Hughes reported US nat gas rigs rose 1 to 101 last week.
- US natural gas rigs are down 20 y/y.
Continuous Prompt WTI Spread: A value below zero is considered a market in contango with the front month contract discounted to the deferred. This market structure typically indicates high supply, low demand, or a combination of the two.
